Saturday, October 17, 2015

How Unscrupulous Forex Brokers Can Steal Your Money

A retail forex broker is one that specifically caters to individual traders; these brokers usually say that they do not charge a commission, and that is the first huge red flag that you have to look out for. Retail brokers will often use a lot of fancy words and numbers to convince you that they are the best choice if you want to make money on forex trading, which of course is a big lie; you need to avoid such retail brokers at all costs.

The way retail brokers make money off of their clients/victims is by creating their own market, which is why they are sometimes called "market makers". For instance if the spread for the EUR/USD market is between 1.2567 and 1.2568, the retail broker will be asking their clients to sell for 1.2566 or buy it for 1.2569, this will effectively give them a two pip profit that they will be keeping for themselves.

How can they cheat you?

Besides price fixing, retail forex brokers will even trade against their clients. Going back to the EUR/USD market mentioned earlier; if both you and your broker enter the same trade at 1.5674, and the market moved against you and the price went down to 1.5628, your retail broker might offer you a much lower price, like around 1.5624 so you can exit. Once you are out of the trade, your broker is left with a four pip difference between the actual price of the spread and what you were told, which your broker will pocket as pure profit.

And, because a retail broker can and will trade against you, you will most certainly lose because your broker has access to your data; he will know all your entries, targets, and even the stop-losses that you have on your trading platform. Your broker will take advantage of all of these bits of information so when your trades go sour, you will be the only one taking a hit.